British Airways' three-way alliance cleared for takeoff

European regulators have handed British Airways the dream ticket - approving the carrier's merger with Spain's Iberia and its transatlantic joint venture with American Airlines.

Brussels gave BA the green light to proceed with both deals amid fevered talk that the flag carrier will also get the go-ahead from Washington on its landmark three-way transatlantic alliance with AA and Iberia within hours.

Senior industry sources said the US Department of Transportation (DoT) will approve the proposed tie-up within 24 hours, rejecting competition concerns.

Dream ticket: British Airways has been given the green light to proceed with its Iberia and American Airlines deals.

When finalised later this year, a combination of BA, AA and Iberia
will create the world's largest airline alliance. The joint venture
will allow the three partners to collaborate on transatlantic routes by
coordinating schedules, and sharing costs and revenues.

Regulatory clearance for both deals is a huge shot in the arm for BA's pragmatic, modernising chief Willie Walsh.

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Britain's flag carrier is on track to generate huge cost savings through both deals.

Its triple-layered deal with American Airlines is set to boost BA's bottom line by up to £230million a year.

Meanwhile company forecasts tip the Iberia merger to cut BA's overheads by a further £330million a year from 2015.

The bulk of the Iberia savings will be achieved by stripping out duplicate costs, mostly in 2013 and 2014.

BA reckons that spending on IT systems alone will be cut by £56million a year within five years. Maintenance costs will tumble by £46million a year, while purchasing overheads will be reduced by £22million.

Douglas McNeill, transport analyst at Charles Stanley, said:
'The aim here is to eliminate overlapping costs and the savings will be
substantial.

'It's as much about top line as bottom line with this deal, and I expect cost savings to beat any official expectations.'

A few wrinkles remain. American DoT approval would require the
merged airline to give up four take-off and landing slots at Heathrow
Airport, half of which relate to routes between London and Boston.

In September, Iberia's board and shareholders will vote on
BA's recovery plan to bring its huge £3.7bn pension deficit back into
balance - though neither side is expected to mount much of a protest.

By the end of 2010, BA (up 0.9p at 207.9p) and Walsh should be
in charge of a new company, to be named International Airlines Group.

The Irishman's first major step as boss of IAG is likely to be the acquisition of another major airline.